There are more than 13,000 taxis operating in New York City, not including over 40,000 other for-hire vehicles. Their distinctive yellow paint has made them New York icons. John D. Hertz started the Yellow Cab Company in 1915, which operated in a number of cities including New York. Hertz painted his cabs yellow after he read a University of Chicago study identifying yellow as the most visible color from long distances. In 1967, New York City ordered all “medallion taxis” be painted yellow.

In New York City, radio dispatching was introduced to that city's famous fleet of yellow taxis in the 1960s. After complaints from customers who were being passed up on the street by taxis on the way to pick up dispatched trips, a new regulation was introduced requiring radio-equipped taxis to not be painted yellow.

Taxicabs are operated by private companies and licensed by the New York City Taxi and Limousine Commission (TLC). “Medallion taxis,” the familiar yellow cabs, are the only vehicles in the city permitted to pick up passengers in response to a street hail. The TLC also regulates and licenses for-hire vehicles (FHVs, known as “car services” or “livery cabs”), which are prohibited from picking up street hails (although this is only enforced in middle and lower Manhattan) and are supposed to pick up only those customers who have called the car service's dispatcher and requested a car. While medallion taxis in New York are always yellow, car service vehicles may be any color but yellow, and are usually black. For this reason, these taxi operators are sometimes called “black car” services. Despite the de jure prohibition on picking up passengers who hail on the street, some livery cabs nevertheless do so anyway, often to make extra money.

When a livery cab engages in street pick-ups, it becomes known as a “gypsy cab.” They are often found in areas not routinely visited by medallion cabs, such as northern Manhattan, and authorities tend to turn a blind eye to the practice rather than leave sections of the city without cab service. The use of gypsy cabs is strictly at the rider’s risk, and it is recommended that passengers negotiate a fare with the driver before entering, as the cabs are not equipped with meters, and fares are not regulated by the TLC. The driver also is taking a risk that the passenger will leave without paying or even rob him.

Medallion taxis are named for the official medallion issued by the TLC and attached to a taxi’s hood. The medallion may be purchased from the City at infrequent auctions, or from another medallion owner. Because of their high prices, medallions (and most cabs) are owned by investment companies and are leased to drivers (“hacks”). An auction was held in 2006, where 308 new medallions were sold. In this auction, all of the medallions were designated as either hybrids (254) or handicap accessible (54) taxis. Prior to the auction there was concern as to whether there would be demand for these more restricted medallions, but the concern quickly evaporated when the medallions sold for a record price, with the individual alternate fuel averaging $403,613.98 for each minifleet medallion averaging $500,500.00 minifleet. The reason these restricted medallions sold for slightly more than the unrestricted medallions is that they were new medallions, therefore the %5 transfer tax was not applicable ($20,000/$50,000 for individual/minifleet transfers)

Yellow cabs are often concentrated in the borough of Manhattan, but patrol throughout the five boroughs of New York City and may be hailed with a raised hand or by standing at a taxi stand. A cabxs availability is indicated by the lights on the top of the car. On some cabs, these lights are accompanied by advertisements. When just the center light showing the medallion number is lit, the cab is empty and available. When the OFF DUTY inscriptions to either side of the medallion number are lit, the cab is off duty and not accepting passengers. When no lights are lit, the cab is occupied by passengers. The amber lights on top of the cab are additional turn signals, and do not reflect the occupancy of the car. There is an additional round amber light mounted on the left side of the trunk, as well as an amber light at the front of the cab, usually hidden from view behind the grille. When activated by the driver, these xtrouble lightsx blink to summon the police.

A maximum of four passengers may be carried in most cabs, although larger minivans may accommodate five passengers, and one child under seven can sit on an adultxs lap in the back seat if the maximum has been reached.[3] Drivers are required to pick up the first or closest passenger they see, and may not refuse a trip to a destination anywhere within the five boroughs, neighboring Westchester and Nassau Counties, or to Newark Liberty International Airport. As of June 2006, fares begin at $2.50 ($3.00 after 8pm, and $3.50 during the peak weekday hours of 4-8pm) and increase based on the distance traveled and time spent in slow traffic (40 cents for each one-fifth of a mile or 120 seconds of no motion or motion under 6 miles an hour). The passenger also has to pay the fare whenever a cab is driven through a toll.